Non Compete Unenforceable for Unlawful Wage Deductions
One reason a court may not enforce a non compete clause is if the employee has had unlawful deductions taken from their paycheck. Below is one example of a non compete dispute we were able to resolve favorably due to unlawful wage deductions.
Wage Deduction and Non Compete Case Study: BackgroundClient B was a hair stylist employed by a salon that was part of a regional chain. She had a dream of opening her own salon, and was saving money to do so. This was made more difficult by the fact that her employer had a practice of deduction a "product charge" from the commissions due for each customer. This amount was deducted to cover the salon's cost of purchasing products used in serving customers.
She did not know if she had a non compete agreement, but did some research about restrictive covenants in the hair salon industry. In her research, she learned that the standard geographic area for non compete agreements in her industry was three miles. Armed with that information, she found a location four miles from her employer and signed a lease. When she gave her notice, her employer threatened her with a lawsuit based on an employment agreement she had signed with a covenant not to compete. Wage Deduction and Non Compete Case Study: Strategy and OutcomeWe helped Client B fill out a complaint with the Massachusetts Attorney General about the wage deductions. Once she received her right to sue letter, we brought a complaint in court seeking damages as well as a declaratory judgment that her non compete was unenforceable.
With respect to the non compete, we argued that the employer had no legitimate business interests to protect, and that she had no trade secrets or confidential information. In addition, most of her clients had followed her from a previous job, making it questionable whether the employer had any goodwill interest in those clients. In addition, we argued that the agreement was unenforceable because of the unlawful wage deductions. The employer moved for summary judgment on this issue, arguing that it was legitimate to deduct product charges from commissioned employees. After the court denied their motion for summary judgment, we were able to resolve the case. Client B was paid for the deductions, and continues to provide services out of the location she chose in the first place. Wage Deduction and Non Compete Case Study: Takeaways |
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There are a number of lessons to be learned from this example that may be helpful to you if you are facing a non compete dispute. Here are a few:
- You don't have to wait for your employer to sue you. Sometimes it is to your advantage to be the first one to go to court, as it was in this case.
- If you are facing a threat of non compete enforcement, it pays to examine your own compensation history carefully. You may not have otherwise thought to raise any issue or complaint about it. But it can be a very useful tool if you are facing a dispute over your employment agreements.
- If you have no confidential information or intellectual property belonging to your employer, you may be able to challenge their claimed legitimate business interests in enforcing the non compete provision.
- If you are in a sales or customer service role and your client base preexisted your employment, you may also be able to challenge your employer's claim to an interest in goodwill.
- What is a reasonable geographic area depends on the industry you are in. Where the industry standard for salons was three miles, even five miles might have been too broad.
Can We Help You?
We have years of experience representing people in non compete lawsuits in Massachusetts state and federal courts, as well as responding to cease and desist letters, and we would be happy to help. You can use the button below to schedule a call back from a member of our team, give us a call at 781-784-2322, or fill out our web form to let us know a little more about your situation.
